Optimal Transition from Coal to Gas and Renewable Power Under Capacity Constraints and Adjustment Costs
Renaud Coulomb, Oskar Lecuyer, Adrien Vogt-Schilb
Environmental and Resource Economics | SPRINGER | Published : 2019
Given a cap on carbon emissions, what is the optimal transition from coal to gas and renewable energy? To answer this question, we model the dependence of the energy sector on both (1) polluting exhaustible resources and (2) long-lived capital such as power plants. To minimise adjustment costs, optimal investments in expensive renewable energy start before phasing out fossil-fuel consumption, and may even start before investing in gas-fired plants. Investment in gas-fired plants can reduce the need for expensive renewable investment in the short term, but they eventually need to be decommissioned to make room to carbon-free power in the long term. Simulations of the European Commission’s Ene..View full abstract
We thank Mook Bangalore, Celine Guivarch, Louis-Gaetan Giraudet, Stephane Hallegatte, Jean-Charles Hourcade, Guy Meunier, Jean-Pierre Ponssard, Antonin Pottier, Philippe Quirion, Julie Rozenberg, Francois Salanie, Ralph Winkler, one anonymous referee from the FAERE Working Paper series and two other anonymous referees for useful comments and suggestions on earlier versions of this paper. We are responsible for all remaining errors. We are grateful to Patrice Dumas for technical support, and to Institut pour la Mobilite Durable (Renault and ParisTech), Ecole des Ponts ParisTech and EDF R&D for financial support. The views expressed in this paper are the sole responsibility of the authors. They do not necessarily reflect the views of the Inter-American Development Bank, its executive directors, or the countries they represent.